Go Directly To Jail. Do Not Pass “GO.” Do Not Collect $200.

By Diane A/17 Jul 2015/Comments Off on Go Directly To Jail. Do Not Pass “GO.” Do Not Collect $200.

I’ve written before about how paying back wages and penalties may not be the worst thing that happens to a business owner who underpays his workers. Turns out, you can also end up doing time in jail.

But, surprisingly, not everyone seems to have gotten the message. Apparently, not every business owner and manager reads this blog. (I know, right? Shocking!)

Specifically, Abdul Jamil Khokhar, who (operating as BMY Foods, Inc.) owned and operated nine Papa John’s franchises in New York City, seems to have been operating under the misapprehension that he could get away indefinitely with not paying hundreds of his employees the overtime to which they were legally entitled.

The Back Story

As the story goes, it may have been that somehow the US Department of Labor (DOL) got wind of Mr. Khokhar’s scheme to underpay his employees. Or he may have simply been unlucky, and been selected for a random audit. The DOL does conduct these from time to time, focusing particularly on low-wage industries, such as pizza-delivery franchises.

In any case, the DOL was investigating his payroll policies and practices.

According to court documents filed by the prosecution, when Mr. Khokhar learned he was under investigation, he sprang into action. Unfortunately for him, this action didn’t seem to involve anything along the lines of “correcting any errors and paying his workers properly going forward.” Instead, here’s what he did:

Created a bunch of ficticious “employees” in his timekeeping system.

Required each employee who was approaching the overtime threshhold (between 35 and 40 hours in a week) to begin clocking in and out under one of these phony names instead of continuing to clock in under their own name.

Paid the employees under the table, in cash, for the hours they worked under the fake name. (Straight time only; no time-and-a-half overtime.)

Maintained a separate set of books to record the cash payments, to try to hide them from the DOL investigators.

Filed false quarterly tax returns with NY State that omitted the cash payments, in an effort to further conceal the deception. (This resulted in underpayments to the State Unemployment Insurance Fund, among other things.)

The Aftermath

Working together, the NY State Attorney General’s Office (NYAG) and the DOL were able to uncover the scheme. For instance, the NYAG executed a search warrant at Mr. Khokhar’s franchise office and found his records of both the cash payments and the phony names.

So now the NYAG has filed criminal charges. They’re seeking not only $230,000 in back wages for 300 current and former employees, they’re also asking for jail time for Mr. Khokhar. The DOL has already obtained a consent judgment ordering him to pay $230,000 in liquidated damages to employees and $50,000 in civil monetary penalties. (Keep in mind, this is on top of any legal fees Mr. Khokhar and his business may have incurred so far, or that they will incur in the future as the criminal proceedings play out.) In addition, under the terms of the judgment Mr. Khokhar’s Papa John’s franchises must create procedures for an internal compliance officer and will be subject to independent auditing of their practices.

I’m thinking it might have been easier (and cheaper) to simply pay the overtime. Agree?

The Solution

Absolutely, overtime calculations can sometimes be tricky. Two things that can save a business owner a lot of headaches (and, potentially, a lot of legal trouble) are a good time tracking system, and a good payroll system. Fortunately, Acroprint can help with both of those. Our AcroTime workforce management platform includes both time & attendance and payroll modules, seamlessly integrated to make it all as smooth and easy-to-use as possible. Better yet, both modules offer a ton of advanced features to help you better manage your workforce and control your labor costs (all while staying on the right side of the law). See for yourself — request your free, no-obligation demo today!